New Delhi, Sep 11 (IANS): The outlook on agri-income which is one third of rural income is encouraging, with South India faring better than other regions, but the risk from excessive rainfall in September-October persists.
According to a research report by J. M. Financial, supply chain challenges, government support (high MSP procurement), supportive global prices and shortages of some crops like vegetables are likely to support food prices and therefore farm realisations.
J. M. Financial conducted 11th Rural Safari "remotely" amid the Covid-19 pandemic and gathered data from 13 Indian states. "Our key conclusions are the outlook on agri-income (1/3rd of rural income) is encouraging, with South India faring better than other regions, but the risk from excessive rainfall in September-October'20 persists", it noted.
The impact of long-term structural initiatives (marketing reforms, contract farming, agri-infra boost, etc.) is yet to reflect on the ground but the start has been encouraging.
However, there has been a significant weakness in non-agri income; localised and ad-hoc restrictions on movement across districts, even in July-August, have further delayed income revival.
"Lack of local jobs and floods in some states have propelled the return of 35-40 per cent of migrant labourers to the cities, as per our survey", J. M.Financial said.
While government welfare transfers have partly supported rural cash flows so far, we estimate that at least Rs 2.1 trillion (1.1 per cent of GDP) is still needed in welfare benefits to offset the likely decline in rural disposable income in FY21", the research noted.
Covid-19 cases have spread further to rural India, now one half of confirmed cases vs. one fourth at end-June but a low reported mortality rate barring western India has so far limited its adverse impact.
"While we expect sequential improvement in income/consumption in 2HFY21, we also anticipate continued caution, a focus on essentials (staples, hygiene and education) and agri-investments (tractors, agri-inputs, pipes, etc.) to persist. Given the slow revival in non-agri income, we expect discretionary consumption growth to be back-ended in FY21", the report said.
Despite a commendable increase in MGNREGA and overall government spending, subdued private economic activity and ad-hoc lockdowns have impacted non-agri income significantly. "This is reflected in the earlier-than-anticipated return of migrant labourers to cities (as per our survey), particularly in the NCR region. As the number of passenger trains is still less than five per cent of normal, migrant labour groups have pooled vehicles to return, indicating stress on income levels", the report said.
Consequently, wage rates in urban areas -- which have seen a spike -- could normalise in the next few months with improved labour availability.